State Govts Catch on to Saving Strategies Every Consumer Knows About

Did you know that shopping around can save you money? Or that it is unwise to spend money you don’t have? Apparently, state governments are just catching on to these and other innovative saving strategies.

The WSJ asked four state governors to explain how they’re trying to cut spending. So what are they doing? Pretty much the same kinds of things that smart consumers do all the time, only on a larger scale.

Simple strategy all consumers know about:
SHOP AROUNDPennsylvania Governor Ed Rendell explains how his state now spends $2 billion less to run the government than it did two years ago:

This didn’t happen by accident; it’s a direct result of the smart management measures we put into place.

Or is it that Pennsylvania simply put an end to remarkably dumb, inefficient, and wasteful practices? Same difference, I suppose. One of the “smart management measures” undertaken basically amounts to shopping around for deals rather than paying retail—something that any remotely savvy consumer does on a regular basis. By doing so, Pennsylvania has saved $30 million on office supplies and computers.

Simple strategy all consumers know about:
CONSIDER THE LONG-TERM IMPLICATIONS OF CONTRACTS
A crazy thing happens when you sign a contract: You’re expected to live up to your end of the agreement not only for the first few years, but for the full duration of the contract. (The current mortgage-foreclosure mess is an exception.) So it behooves you to understand what the long-term implications are of any contract, and to make sure that you’ll be able to fulfill your obligations.

It seems like many, many politicians who long ago agreed to state employee pension plans failed to consider the long-term effects of these contracts on state budgets. It’s getting to the point where we’re seeing some of these effects in California, for example. Governor Arnold Schwarzenegger writes:

Over the last decade in California, spending on state employees’ compensation rose nearly three times faster than state revenues… This year, for the first time ever, our state was forced to spend more on retirement costs ($6.5 billion) than on higher education.

I suppose no one should be surprised that many politicians didn’t give all that much thought as to the long-term consequences of sweet pension deals: After all, chances are that by the time the public realizes the problems caused by these agreements, the politicians who signed the contracts would be out of office—and perhaps enjoying their own state pensions.

We cut $4.3 billion from a variety of programs and agencies, reduced employee head count by 3,000, negotiated wage and benefit concessions from state employee unions, and increased state employee health-care contributions. We also capped pensions and ended loopholes that some employees used to boost their retirement benefits, such as by claiming an entire year of service for working one day in a calendar year.

Most consumers understand that the easiest way to save is to just stop spending heedlessly on things that aren’t necessary.

We obtained enhanced authority from the legislature for the governor to order a freeze that covers all noncritical areas of state government, not just a select few agencies. This strict freeze, together with reductions in full-time positions, will save over $20 million a year.

Overall, the idea seems to be that governments should be run more like businesses, with sound, efficient management practices and as little waste as possible. Governments aren’t businesses, however. When a business makes poor decisions, it closes up shop. When a state government makes poor decisions, it raises taxes.

But I suppose any effort to increase state government efficiency should be applauded. Perhaps one day, governments will be as well-managed as the average consumer household.